UHERO 101.4: Record Visitors, Flat Spending

Kimberly Burnett, Blogs, Economy

Last year is often described as a banner year for the Hawaii tourism industry. With record visitor arrivals close to 8 million, it is easy to come to the conclusion that tourism is stronger than ever in the state. Is the number of tourists in a destination the primary indicator to measure success of the industry? While the Aloha State certainly enjoys welcoming record numbers of visitors to the islands, does more visitors necessarily imply a stronger, more vibrant economy? More visitors may imply the need for more workers in the tourism industry, but also places pressures on infrastructure and leads to increased traffic and congestion. How else can success be measured?

An important indicator of visitor industry success is the level of real (adjusted for inflation) visitor spending each year. While UHERO calculates real visitor spending using the Honolulu Consumer Price Index (CPI) rather than a specific tourism price index that would include, for example, more hotel and car rental prices than the average resident’s spending bundle, this is a common proxy for the changing cost of tourism goods and services. Deflating prices by the Honolulu CPI helps us understand when people are actually spending more money, versus prices just increasing rapidly.

While visitor arrivals to Hawaii have grown steadily over time (especially quickly through the late 1980’s), the level of real visitor spending has actually fallen from its peak in 1989, and has been relatively flat ever since. While there were 20% more arrivals to Hawaii last year than in 1989, they are spending 12% less money in real terms (prices are also rising). So while the beaches (and freeways!) are packed, Hawaii’s visitors are spending less (in real terms) in restaurants, shops, and hotels, potentially leaving a smaller economic imprint now than in most of the last two decades.

– Kimberly Burnett

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Source: Hawaii Tourism Authority and UHERO